James only takes 2-year deal with Cavaliers

Cleveland’s LeBron James, left, talks with teammate Anderson Varejao as they attend a event Saturday in Rio de Janeiro. James has signed a two-year deal to play for the Cavaliers, a person familiar with the negotiations said.
(Photo:
Leo Correa/AP
)

LeBron James is regarded as the best player in the world and was the No. 1 free agent this summer. Now, he is looking out for No. 1.

James signed a two-year, $42.2 million contract with the Cleveland Cavaliers, a person familiar with details of the deal told USA Today on Saturday. That will allow the NBA’s biggest start to take advantage of the league’s upcoming TV deal, which is expected to increase the value of max contracts.

The person also said this is strictly a business decision. James still is intent on finishing his career with the Cavaliers, as he said in his Sports Illustrated essay about the decision. The person requested anonymity because he was not authorized to speak publicly about the deal.

James could have taken a four-year contract worth more than $88 million from the Cavs. But now he will be able to negotiate a better contract in two years and also has the choice to opt out after one season to renegotiate in summer 2015. Player options only can come before the final season of a contract, another reason for the two-year deal.

The TV component is important and valuable. The NBA and players share basketball-related income at a near 50-50 split, and TV revenue is included in BRI. The higher the BRI, the more money for players.

The NBA’s TV deal with ABC/ESPN and TNT/Turner Sports expires after the 2015-16 season, and revenue is expected to increase significantly in the next TV deal. Fox Sports is expected to join the bidding war for television rights, and ratings have been strong for the current networks. That means a max deal will worth more in a new TV deal.

Regardless of the TV deal, the league’s salary cap — which the value of max deals are based — is expected to increase. James gives himself the ability to take advantage of that, too.

In 2014-15, James will make $21,573,398. But if next offseason’s max opening salary is projected higher than what James will bring in, he could opt out and take the bigger deal for one year and still be a free agent for the 2016 offseason and new TV deal.

Again, this is a business decision and not an opportunity for James to test free agency again. Consider James never has had a full max salary — he didn’t get one with Miami — but now is positioning himself to take advantage financially for the rest of his career.

At some point, he likely will sign a long-term max contract with Cleveland. But for now, he is stretching his value with a unique contract situation.

Don’t be surprised if James negotiates and re-negotiates max deals that are shorter in length for the next few seasons. The players and owners have the option to terminate the current CBA after the 2016-17 season, which could lead to another change in maximum contracts.

There is another component to James’ strategy, too. He is the face of the NBA, and he is sending a message to other players: Take advantage of the financial position.

Sure, James is doing what’s best for him. But he is also encouraging other players to do the same.